LIBF- UNIT 3 EXAM QUESTIONS AND ANSWERS
100% PASS
Bank rate - ANSWER The interest rate that the Bank of England uses when it lends money to
other banks. Financial services providers take account of the Bank rate when they decide how
to set interest rates on their own products.
Cash flow forecast - ANSWER A plan of expected incomings and outgoings over several time
periods, such as the next three months or a year.
Cash flow modelling - ANSWER A software program that can predict the medium- and
long-term impact of different decisions and events on an individual's income, expenditure
and savings plans.
Credit union - ANSWER A mutual organisation (that is, owned by its members) that provides a
range of financial products to members, eg savings accounts and personal loans.
Flexible financial planning - ANSWER Making financial plans to cover wants, needs and
aspirations over the medium to long term, which make allowance for unexpected expenses
and changes in circumstance (eg by including saving and insurance).
Income protection insurance - ANSWER A policy that allows people to manage the risk of loss
of earnings over a long term. It pays out a monthly income to insured people who have
suffered an accidental injury or long-term illness and who are therefore unable to work.
,Individual savings account - ANSWER An account that pays interest tax-free on savings up to
a certain level. In 2014 the rules were changed, with a higher limit on the amount that can be
saved tax-free. Savers can choose to save the entire amount in cash, or in stocks and shares,
or in a mixture of the two.
Insolvency - ANSWER A situation in which a person cannot repay what they owe because their
debts are greater than their assets.
Money purchase Pension scheme - ANSWER A pension scheme in which the value of the fund
available at retirement is based on the contributions made by an employee (and their
employer, in workplace schemes), which are invested. Also known as defined-contribution
schemes.
Mortgage payment protection insurance - ANSWER An insurance policy intended to cover
mortgage payments in the event of illness or unemployment.
Personal debt - ANSWER The debt owed by individual consumers (as opposed to the debts of
companies or governments).
Recession - ANSWER A period of at least six months in which the amount of goods and
services the country is producing is shrinking.
Savings bond - ANSWER A savings product held for a fixed period, eg two years. The holder
, can only make a limited number of withdrawals, or none at all, during that period without
incurring a penalty.
Shares - ANSWER Also known as 'equities', investments that represent part-ownership in a
company.
Sustainable personal finance - ANSWER Achieving and maintaining a balance between
personal income and expenditure to satisfy needs, wants and aspirations within a budget.
Attendance allowance - ANSWER Payable to those aged 65+ who have a long-term illness or
disability that means they cannot perform basic daily living activities or have limited mobility.
Carer's allowance - ANSWER Paid to anyone over 16 who spends 35 hours per week or more
looking after someone who has substantial care needs.
Child tax credit - ANSWER A benefit paid to people who are in low-paid work, to help with
the costs of bringing up a child.
Consumer prices index - ANSWER One of the means the government uses to measure
inflation. It is calculated by checking the price of a representative sample of goods on a
monthly basis - this enables statisticians to measure how much prices are rising or falling.
Contributory benefits - ANSWER Benefits paid to eligible claimants providing they have paid
the required number of National Insurance contributions (NICs).
100% PASS
Bank rate - ANSWER The interest rate that the Bank of England uses when it lends money to
other banks. Financial services providers take account of the Bank rate when they decide how
to set interest rates on their own products.
Cash flow forecast - ANSWER A plan of expected incomings and outgoings over several time
periods, such as the next three months or a year.
Cash flow modelling - ANSWER A software program that can predict the medium- and
long-term impact of different decisions and events on an individual's income, expenditure
and savings plans.
Credit union - ANSWER A mutual organisation (that is, owned by its members) that provides a
range of financial products to members, eg savings accounts and personal loans.
Flexible financial planning - ANSWER Making financial plans to cover wants, needs and
aspirations over the medium to long term, which make allowance for unexpected expenses
and changes in circumstance (eg by including saving and insurance).
Income protection insurance - ANSWER A policy that allows people to manage the risk of loss
of earnings over a long term. It pays out a monthly income to insured people who have
suffered an accidental injury or long-term illness and who are therefore unable to work.
,Individual savings account - ANSWER An account that pays interest tax-free on savings up to
a certain level. In 2014 the rules were changed, with a higher limit on the amount that can be
saved tax-free. Savers can choose to save the entire amount in cash, or in stocks and shares,
or in a mixture of the two.
Insolvency - ANSWER A situation in which a person cannot repay what they owe because their
debts are greater than their assets.
Money purchase Pension scheme - ANSWER A pension scheme in which the value of the fund
available at retirement is based on the contributions made by an employee (and their
employer, in workplace schemes), which are invested. Also known as defined-contribution
schemes.
Mortgage payment protection insurance - ANSWER An insurance policy intended to cover
mortgage payments in the event of illness or unemployment.
Personal debt - ANSWER The debt owed by individual consumers (as opposed to the debts of
companies or governments).
Recession - ANSWER A period of at least six months in which the amount of goods and
services the country is producing is shrinking.
Savings bond - ANSWER A savings product held for a fixed period, eg two years. The holder
, can only make a limited number of withdrawals, or none at all, during that period without
incurring a penalty.
Shares - ANSWER Also known as 'equities', investments that represent part-ownership in a
company.
Sustainable personal finance - ANSWER Achieving and maintaining a balance between
personal income and expenditure to satisfy needs, wants and aspirations within a budget.
Attendance allowance - ANSWER Payable to those aged 65+ who have a long-term illness or
disability that means they cannot perform basic daily living activities or have limited mobility.
Carer's allowance - ANSWER Paid to anyone over 16 who spends 35 hours per week or more
looking after someone who has substantial care needs.
Child tax credit - ANSWER A benefit paid to people who are in low-paid work, to help with
the costs of bringing up a child.
Consumer prices index - ANSWER One of the means the government uses to measure
inflation. It is calculated by checking the price of a representative sample of goods on a
monthly basis - this enables statisticians to measure how much prices are rising or falling.
Contributory benefits - ANSWER Benefits paid to eligible claimants providing they have paid
the required number of National Insurance contributions (NICs).
